Elliot Wave and the ASX200 bear market

November 2007 was the start of a secular bear market in Australian equities. In Elliot Wave terms this was the start of a major A,B,C correction as shown in the chart of the ASX200 below. Elliot Wave analysis is useful in providing the investor with a longer term, broad perspective of the market. fib long term

The above chart shows the ASX200 over an 11-year period with the A, B, C waves of the bear market labelled in red. Wave A started in November 2007. Wave B started in March 2009 and wave C which started in March 2015 is expected to have some time and distance to run. The target for the C wave (the end of this bear market) is probably at least the 3150 level which was the low of the 2008 bear market.

The following chart of the ASX200 provides a more detailed analysis of wave C which started in March 2015. As is develops Wave C can be expected to divide into 5 waves. Wave 1 which is complete has divided into 5 waves and ended in February 2016. This was followed by the counter trend wave 2 which subdivided into a 3 (A,B,C) waves. Wave 2 terminated abruptly on May 3rd at the 5350 level (marked by the red line) which was the very significant 50% Fibonacci retracement of wave 1.

As of May 4 the ASX200 entered wave 3 which cannot be the shortest wave of the 5 waves in major wave C.fib CLOSE

Economic events in the major world economies and events in the Middle East are consistent with the outlook for a continuing bear market in international and Australian equities. Elliot Wave analysis does provide some indication of how the ASX200 may unfold. A potential target for the end of the Australian bear market (the end of wave C) is yet to be determined but is likely to be at least the low of the 2008 wave A, at about 3120 but it is too early to make such a projection.

Bear markets are not sudden and totally unexpected events. Here Elliot Wave is not used as a forecasting tool but rather it provides a model and explanation as to how the market might unfold. It thus provides the investor with a broad perspective of market activity.

This above analysis is of course a model of the ASX200 action and does not in any way purport to provide financial advice.

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